Liberating the Israeli economy from occupation
By Ariel Natan Pasko
web posted August 16, 2004
Well, I'm sorry to have to say, "I told you so," but the neo-
socialist backlash is well underway in Israel. Israel's left-
dominated radio and television, orchestrated another "media
frenzy" recently, after the Central Bureau of Statistics published
their latest report on the state of the economy and the poor. This
follows the Labor Party's recent complaints -- when coalition
negotiations with Likud came up -- of the need to rollback much
of the Israeli government's economic reform program.
The CBS study -- based on a poll 7,200 Israelis aged 20 and
over from all regions of the country -- found that 46 per cent of
Israelis don't manage to cover their monthly household expenses
and that 54 per cent of Israelis have given up on clothes and
shoe shopping. Thirty-eight percent of Israelis polled, forgo
heating and air conditioning in their homes due to lack of money
and 37 per cent do not believe their financial situation will change
for the better.
Most painful, are the results of the survey relating to health care
and food. The CBS found that 65 per cent are in need of dental
care yet 45 per cent -- over one million Israelis -- did not seek
treatment. Thirty percent of respondents do not have
complementary health insurance because of the additional costs.
Fourteen percent of Israelis aged 20 and over -- an estimated
550,000 people -- have forsaken food purchases in the past
year due to financial difficulties, while half a million passed up on
buying needed medications in 2003, according to the study.
Leftist politicians and the media jumped on the survey results to
decry the government's attempts to free up the economy after
decades of "socialist occupation". They described the situation as
"two states for two peoples-rich and poor," playing on the leftist
pro-peace process slogan "two states for two peoples," meaning
Israel and Palestine.
Well, I for one am against the "occupation," ... socialist,
economic control, that is.
But, there is a bit of truth to what those leftist "protectors of the
poor" say -- funny how so many of them are so well off -- a well
known phenomena world-wide, rich socialists. According to
reports, Israel is in second place globally -- behind only the
United States -- in income disparity. That is the gap between the
poorest and richest sectors of society. But there's a major
difference, Israel has a small economy just pulling out of it's
worst recession ever, with almost 11 per cent unemployment,
and the US has a very large economy, with hearty growth and
less than 6 per cent unemployed. Entrepreneurial opportunities at
all levels abound in America; Israelis still await those same
opportunities.
As I wrote in, "Israeli Capitalism With A Human Face," back in
March 2003, "I'm generally in favor of the attempt by Finance
Minister Netanyahu and the Israeli government to reform the
economy. It should be obvious to all by now that it's way
overdue. But, it must be CAPITALISM WITH A HUMAN
FACE. That is, it must be done with a concern not to further
impoverish the weaker sectors, in the name of progress. It must
open up opportunity at the same time that it reduces the
government budget".
Developing a system of retraining for the newly and long-term
unemployed is crucial. With many labor intensive jobs having left
or leaving the country, the hi-tech downturn, and now planed
public sector cuts; some combination of government sponsored
programs through the Labor Ministry (they're supposed to be
working right?), vouchers -- for use in private retraining -- from
the National Insurance Institute, and serious encouragement for
the growth of a private sector retraining industry, on a massive
scale, is mandatory! And that retraining should emphasize
ENTREPENEURISM as well as the new skills being taught.
Israelis should no longer expect 'big brother government' to take
care of their futures. A SAFETY NET YES, A FREE RIDE
NO!
Jews have always done well economically throughout their
history; there is no reason that in the Jewish State it should be
any different. If we don't help provide the tools to people to pull
themselves up, they might just pull us down; maybe we should
even give them a hand up. If some half-baked 'Thatcherite'
program is implemented without serious thought -- like is
currently planned -- then the masses of growing poor, will
probably still feel that, "Capitalism has a bad name in Israel." It
might even lead to a neo-socialist backlash that would set back
the cause of economic liberalization in Israel a generation or
more. That would only put us on the highway toward third-world
status. We as a society cannot suffer pockets of great wealth and
pockets of great poverty -- labeled capitalism -- or the 'Neo-
Socialist Workers Paradise' of total equality and no growth.
But a well thought out and balanced program of tax cuts, budget
reductions, capital market reforms, deregulation, monopoly
busting, increased labor mobility, retraining for the 21st century
economy, and encouragement of the non-profit social welfare
sector to take over where government leaves off; true economic
freedom, that is, CAPITALISM WITH A HUMAN FACE,
could transform the Israeli economy into a dynamic, robust,
vibrant one. It would become an Israeli economy and society
that pulls Aliya -- immigration -- like a magnet, not only from the
lands of despair and danger, but also from the lands of
prosperity, such as Europe, South Africa, Australia, and
America. Imagine what a million well educated -- and free-
market oriented -- American Jews could do for Israel?
Policies like these, in harmony with our long held Jewish
traditions of Tzedakah -- righteousness, charity -- and concern
for the poor and weak; combined with the equally long held
Jewish tradition of entrepreneurial spirit, could lead Israel toward
her goals of prosperity and fulfillment. It would be an ISRAELI
CAPITALISM WITH A HUMAN FACE!"
For the purpose of understanding the following examples, the
Shekel/Dollar ratio is about 4.5:1. The average income of the
richest 10 percent of households in Israel is 41,835 shekels a
month, compared to an average income of 3,108 shekels a
month, for the poorest 10 percent. Most Israelis -- 72 percent --
earn less than the average wage of roughly 7,000 shekels a
month. Nearly 30 percent of Israelis earn minimum wage or less.
But, not all unemployed people have been hit so hard. Recently
retired, former Knesset Speaker and Labor Party MK Avraham
Burg has benefited from Israel's "trickle down" socialist
occupation of the economy. His generous retirement terms
include not only an office, a car, and two aides but even four
burial plots at Har Herzl (the National Cemetary for Israeli
political dignitaries) in Jerusalem, for him and his wife. Two plots
are from the Knesset and two from his stint as head of the
Jewish Agency (a quasi-governmental agency). Can he be buried
twice?
According to Knesset sources, they estimate that Burg will be
entitled to 44 months of salary for an aide, at a cost of 440,000
shekels. Apparently the Jewish Agency will finance his office,
car, and additional aide. If the Knesset decides to finance the
office, car, and additional aide, then the Jewish Agency will be
saved the costs. The cost of the latter should come to another
1.1 million shekels a year. And that doesn't even include his
retirement pension...
Ex-prime ministers Shimon Peres and Ehud Barak (also from the
Labor Party) are each getting about 2 million shekels this year
from the public's tax monies, for their office budgets. This, even
though Barak is now a highly paid consultant -- said to command
$130,000 a month salary -- in the private sector. Peres it is
rumored, sucks off the nipple of the state to the tune of about 5
million shekels a year, pensions and all. Yet Labor Party leader
Peres fawns concern for the poor, demanding the abandonment
of the government's economic reform program -- the only
chance for average people who aren't entitled to bureaucratic
thievery, to get ahead -- in his coalition negotiations with Sharon.
So much for social solidarity...
I've pointed out the Left's hypocrisy, but make no mistakes;
Likud Party politicians, and all the others, are just as guilty of
bureaucratic thievery. Case in point, Likud's David Levy, who
always claims to represent the poor. His Knesset biography
declares "construction worker" as his occupation, something he
hasn't done for at east 30 years, since becoming a politician and
joining Israel's "trickle down" socialist occupation of the
economy. As a Knesset member he makes upwards of 25,000
shekels a month, but in addition to that he receives a "pension" as
having been a former minister in the government. Not long ago, a
Ha'aretz reporter discovered a discrepancy in his "retirement"
supplement and brought it to the attention of the Knesset payroll
office. Rather than receiving the about 22,000 shekels a month,
he was "entitled" to (watch out for socialist occupation
entitlements), Levy was "only" receiving 2,200 shekels a month.
After the mistake was cleared up, Levy pocketed -- after taxes
of course -- another 180,000 shekels, just like that.
Levy's windfall of 180,000 shekels -- at taxpayer expense -- is
enough to support five poor families (at about 3,000 shekels a
month) for an entire year.
Finance Minister Netanyahu's reform program has slashed the
government's budget, especially social welfare spending --
except for politicians and other fatcats -- but hasn't provided for
a reasonable chance at job retraining or entrepreneuring. It was
done too fast, without re-educating the Israeli masses -- long
trained to expect "big brother government" to provide for them
-- to be able to help themselves and take advantage of a freer
economy. De-monopolization, capital and labor market reform,
privatization of government owned companies, educational
reform, have all lagged behind.
With the best of intensions, and generally the right idea that Israel
needs serious structural reform, Netanyahu and the current
Sharon-led Israeli government, have almost blown it. The proof
is in the growing demand -- by Labor and others -- to reverse
Netanyahu's "Thatcherite/Reaganite program". Even a mini-revolt
started within the Likud itself. Trade and Industry Minister Ehud
Olmert proposed his own alternative 2005 budget, claiming it
would "soften" the reforms for the poorest sectors. Although
minimizing the cuts to the social welfare budget and public sector
(Israel has one of the most bloated public employment sectors in
the democratic world), Olmert's proposed budget did little to
help open the economy to growth.
More neo-socialist backlash, this time from within the ruling
party itself.
And, an important point must be made, Ehud Olmert has been
Sharon's "point-man" for some time. He floated the Gaza
withdrawal idea before Sharon announced his disengagement
plan; he floated the idea that settlers who don't leave Gaza
quickly, should be offered less compensation, before it's been
taken up by Israel's Justice Ministry; and he's floated an
alternative budget to Finance Minister Netanyahu's 2005 budget
(the official government proposal).
Sharon publicly supported Netanyahu's budget. Doing so,
helped Sharon "toughen" his position vis-a-vis coalition
negotiations with the Labor Party for joining the government. But
will Sharon (an ex-moshavnik, from a collective farm), switch
sides when it becomes feasible to do so? It is an open secret that
Sharon favors Olmert over Netanyahu as heir apparent, when he
steps down.
During the cabinet debate on the 2005 budget, Finance Minister
Netanyahu criticized Trade and Industry Minister Ehud Olmert
and Defense Minister Shaul Mofaz, "Unfortunately, there are two
ministers sitting here, one with a highly developed social
conscience and one devoted to education, trying to win public
adulation by cheap, destructive populism," Netanyahu charged.
"Their outrageous claims merely arm our opponents who are
trying to frustrate our plan to rehabilitate the economy." All wars
involve friendly-fire tragedies, Netanyahu continued, "In this
case, the friendly fire is aimed right at all our backs. Their
intention is to fire specifically at me, but the result is injury to the
economy of Israel, the credibility of the government, and our
ability to recruit the public's support for the fundamental change
the economy needs in order to restore growth in the years to
come."
Netanyahu promised that all reforms planned for 2005 would be
implemented, including reforms in the capital market, real estate,
and the privatization of Discount and Leumi banks and of the
ports, the oil refineries and the electric company.
The cabinet passed Netanyahu's revised 2005 budget (17-3) --
Ehud Olmert was one of those who voted against it -- but
canceled some of the proposed cuts in education, pensions, and
health care. The budget will now be sent to the Knesset, which is
to approve it by the end of December, although in previous years
approval was postponed to between January and March.
Will the budget's approval be dragged out, to be dangled before
the Labor Party, and others, in coalition negotiations?
And what of the Histadrut labor federation, another remnant of
the socialist occupation? They have been threatening to declare a
labor dispute if the budget was passed, according to the head of
its unions department, Shlomo Shani? Two weeks after their
declaration, workers could begin a strike or sanctions. "The
strength of the sanctions and their duration will depend to what
extent the cabinet accepts the finance minister's proposal literally,
which includes a series of edicts that will harm salaried people
and pensioners," Shani said.
Will the Histadrut, run by Amir Peretz of the One Nation Party
(who recently voted to merge with the Labor Party), provide
Labor with "muscle" in its coalition negotiations with Likud? Will
there be a long drawn out general strike in Israel, whose purpose
is to roll back economic reform?
More important than the question of peace with its neighbors
(the last few years of the Oslo War have given a pretty good
answer to how realistic an idea that was), Israel needs to reform
its economy in such a way as to guarantee economic
liberalization and future growth. That reform has to give Mr. Joe
Israeli, the hope of a better future and the skills to acquire it, to
forestall a neo-socialist takeover.
Israel needs to liberate itself from the socialist occupation of its
economy.
Ariel Natan Pasko is an independent analyst & consultant. He
has a Master's Degree in International Relations & Policy
Analysis. His articles appear regularly on numerous news/views
and think-tank websites, in newspapers, and can be read at:
www.geocities.com/ariel_natan_pasko (c) 2004/5764 Pasko
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